The Buy Side (18 page)

One day I overheard Krishen tell a potential investor in the conference room that I traded like a cat. I’d never heard him openly compliment my trading skills, nor had I ever considered those skills feline in nature. It fact, I’m not sure that what I have is even a skill. Much later in life, I was diagnosed with a low-grade depression called dysthymia, which I apparently had for a long time. But during my trading years I thought I just had an ability to stay even-keeled. The old adage on Wall
Street is “Don’t get too emotional.” “Don’t get married to a stock” is how it’s said. I never have that problem. I never get angry when a stock goes against me, and neither do I get too excited when one goes up. People around me see this as a kind of cool-headed detachment, but I really don’t have control over it. And it gives me a clarity that many other traders lack.

Often, when the price of a stock is going against Angeli, our senior biotechnology analyst, she bolts out of her office, all anxious to sell. One day when I’m on the phone she asks: “What’s going on with Biogen?” I hang up to see what she wants. The stock has been selling off for a couple of days on no news. Have the fundamental reasons we bought the stock changed? I ask. “No,” she says nervously. “But we have to sell the position because it keeps going lower.” As soon as she walks away, I buy more Biogen. Her threshold for pain is my buy signal. That’s when stocks rally.

Maybe Krishen’s right. I do like to sit and observe everything around me before I pounce. Some of my best trades are derived from watching others. Take Nate, for example. He’s the most treasured guy in the office. The reason? He’s just about always wrong. Whatever he gives me, I go the other way. And there’s Vivek, a guy we hired from the sell side. Indian and super intelligent, Vivek, in my opinion, needs a bigger set of balls. He’s a great analyst, but he doesn’t know how to size his bets. When he says, “Buy twenty-five thousand shares of Medtronics,” I buy fifty thousand. I know he’s usually right, but he just doesn’t appreciate how aggressive one needs to be if a stock is on the rise.

I read the body language of those around me and cast a wide net, sponging up information from our portfolio manager, our less senior analysts Karin and Zandy, my fellow traders, even the guy with the tiny 401(k) who brings me my bacon, egg, and cheese in the morning.
If he’s got a bad feeling about his investment, I don’t dismiss it. I’ll usually take the other side of his trade. It’s all information, and it all goes into how I work.

I guess that, partly, my unorthodox way of trading was born out of the lack of any other skill to rely on, at least any other skill in the traditional Wall Street sense. Reading research puts me to sleep, I don’t get excited by market news, and I’m not into technical analysis. I trust my instincts. And, so far, it’s working very well.
Meow
.

From Galleon, I also brought to Argus some experience in another facet of my job. In October, it’s customary for hedge funds to develop a budget indicating the level of commission that will be paid to each broker in the coming year. Though the commissions are paid after each individual trade, the targets give me a guideline to follow. How much each brokerage gets is a decision that usually falls to the head traders and the research team—with the portfolio manager having the final say, of course. At Galleon, I wasn’t making the decisions. But I did handle the spreadsheet that kept track of commissions. It was my job to alert Gary or David if we were ahead or behind in the commission budgets. It was during that time that I began to learn the science behind “bang for the buck,” as they called it in the office. I saw that whether you pay the big houses, such as Goldman Sachs, a million or a half million, you get the same service and resources. If you pay them two million you reach another level, but we aren’t going to do that. So the answer is to pay Goldman $500k. It’s an art to pay as little as you can to get what you want.

Now it’s my duty to evaluate our sales traders. This will be the second October I’ll perform this task at Argus. Once I compose the list I hand it to Krishen and the entire research team. Overall, I try to be as honest and objective as I can, but I’d be lying if I told you I wasn’t also protecting my friends and the guys who entertain me. I have to show
that Randy and James are making money for us. Otherwise Krishen will question why we’re paying their firms well above the going rate.

I tell Krishen that Randy gets me great info. Sometimes I use other people’s moneymaking ideas and give Randy the credit for it. With James, I tell Krishen that his firm loses a lot of money when we ask for capital, but the truth is that his firm loses nothing. Sometimes when I’m trying to get a trade on the tape I’ll just ask another broker to “put me up,” meaning I want them to take the other side of my trade and take the risk. If the stock goes up like I think it will, he’ll lose money until he covers his short. If the stock stays put or goes lower he can cover his short and get out flat or make some money. But the truth is, I’m usually on the winning side. The edge the house has in a casino pales by comparison. Honestly, the broker doesn’t stand a chance. But the broker doesn’t care because he knows it’s part of the price he pays for a big slice of my commission budget. Even if he loses two hundred grand over the year in these types of trades, if I’m paying him a million in commissions during that time, he’s still ahead $800,000. Gus’s commissions are a lot less involved. His are on a level that Krishen doesn’t even pay attention to. He’s easy to hide.

The total we’re paying the Street this year is somewhere between $30 and $35 million. Of that, I’m going to pay Randy’s firm seven figures. That’s a big milestone for his firm since it’s all in one sector—healthcare. It puts him in a very favorable light with his bosses. James will get around $300,000. Gus is going to get $100,000. But his firm pays him 40 percent of the commissions he brings in. So $40,000 goes directly into Gus’s pocket. Not bad for no research, no capital.

This time of the year is fun. I have a lot of mouths to feed, but a full pantry with which to do so. Maybe the best part of budgeting commissions is that the recipient won’t know how much they’re getting until we pay them—budget figures are never shared with the
brokers. But I know, and that’s what matters. I feel powerful and magnanimous all at once. Wall Street is nothing more than a bunch of boys and girls waiting for Christmas morning. And I’m the Secret Santa with all the gifts. Best of all, big commissions bring big expense accounts. And at Argus, there’s no limit to the way the brokers treat me. Now I set my own limits on being entertained.

IN DECEMBER
2002, I’m invited to a big Wall Street charity event. Actually, I received the invite a month before, accepted, and then forgot about it. James calls and reminds me the party is tomorrow night. I’m about to blow it off when he begins to guilt me. “Come on, man, it’s for a good cause,” he says. I know he’s more invested in the party than the cause, but his ploy works and I start thinking about what I should wear.

I haven’t had my hair cut in six months, and I only shave twice a week. Not very Warren Buffett of me, I know. I’m also as skinny as I was when I was nineteen. I’ve hired a personal trainer and started going to the gym regularly. When I went to Equinox to arrange for the trainer, I told the salesperson I wanted a female, someone around my age and fun to be with. He asked me if I wanted a trainer or a date. Her name is Mavis, and she works me hard.

After my workout, I go down to Cheap Jack’s, a vintage clothing
store below Union Square. I like shopping in places like Jack’s, thrift shops, and even the Salvation Army. Outside of my work clothing, I wear one-of-a-kind things, like my white and blue Indian-style sweater with huge buffaloes on the front and back (it’s so ugly, it’s beautiful), and my lace-up cowboy shirt. But today I’m on a mission.

The salesgirl at Jack’s is about twenty-two, with multiple facial piercings and two full sleeves of tattoos. Her hair is dyed so black, it has a purple hue. “Can I help you?” she asks. Shopping for vintage clothing is like looking for love. You really don’t know what you want until you find it. The process can’t be rushed, and you can’t be led.

“Nah, I’m all right,” I say with a smile. I spend an hour on the first floor, rummaging through all of the circular racks. I find a few good shirts, including a powder blue ruffled tuxedo shirt, but I’m looking for something … daring. “We have more stuff downstairs,” the salesgirl says, sensing my disappointment.

The basement is more like it: racks of clothing a block long, one after another. I stand on the bottom step and breathe in the pungent odor of camphor and dry-cleaning solvent. How many lives have been lived in these clothes? What kind of adventure have these threads seen? It’s in this moment of contemplation that something clear across the room catches my eye. I walk directly toward it, pull it off of its hanger, and check the size. Like it was made for me. I have to have it.

The next night I make my way to Cipriani’s on Forty-Second Street. The invitation said eight p.m., so I arrive around nine. At the very least, I expect there’ll be forty or fifty people at the party I know, if not more. Argus is starting to exceed expectations. Although making money has been difficult, investors keep investing. We’re inching closer to a billion dollars under management, which will put us in select company. A billion-dollar hedge fund is a big deal, but a billion-dollar hedge fund
in only one sector (healthcare) is a bigger deal. I’ve started to develop a reputation on the Street, both during work and particularly after. Sales traders tell me they know they’re in for a big night anytime they have a dinner planned with me. They’re never sure what I’m going to say or do next. I know most of my sales coverage will be here, some ghosts from Galleon and maybe a few friends from my Morgan Stanley days. I get out of the cab and walk through the lobby. “Oh my god, look at him,” I hear one doorman say to another.

The space used to be a savings and loan bank when they weren’t afraid to show off. Glorious chandeliers hang from a soaring ceiling that is supported by towering marble columns. The floor is marble tile that shines with the reflection from the subdued lighting and squeaks under the soles of five-hundred-dollar shoes. The room is filled with Wall Street’s elite.

I would imagine that wearing a bright orange prison jumpsuit to any event would garner some attention. But at this particular party, especially in this Eliot Spitzer, Enron, and Tyco era, my outfit is a bit more frightening than your average party costume. No doubt, it represents the worst nightmare of a few of the attendees. But I’m not trying to make some kind of political statement. If you asked me in this moment why I wore it, I’d tell you it was a business move, to get the room’s attention. But maybe the reason is simply that I’m on the buy side and I can get away with it. It symbolizes freedom to me, not incarceration.

I make my way to the bar. The crowd parts to get a look at me. I stride through them. As I do, I get smiles, thumbs-ups, and high-fives. The bartender grins and asks me what I’d like. I’m sipping my beer when Gus almost tackles me. Randy and James follow close behind. “Outstanding,” Randy says.

“Tendy,” says James.

“Dude, you have to meet my bosses,” Gus says breathlessly. “They’re gonna love you.” Gus and I walk across the dance floor. In the middle of the crowd he whispers that he has a present for me. I tell him I’m planning on meeting Lily later.

“Just take it, man,” Gus insists. “I got three more in my pocket.” I place my hand under his and open up my palm for the half-inch drop. Although it’s done subtly, I feel like the entire event sees the pass. I quickly stuff the coke underneath my jumpsuit into my pants pocket.

When we get across the room, there are two men standing by themselves next to a high round table on which lie two cocktail napkins with watery rings. The men now clutch their drinks. Vinnie and Robert are Gus’s bosses. Vinnie’s bald and wears a double-breasted suit that looks like a remnant from his eighties clubbing days. But he has a charming smile. He probably got a raft-load of chicks back in the day. Robert is obviously Vinnie’s lesser half. He smiles and nods a lot. He has a thick brown mustache and eyes to match. I doubt he got many chicks at all. “I hear orange is the new black,” Vinnie says, pumping my hand. “Great to finally meet you.”

Over the next few hours I talk with people from all over the Street: Goldman, Morgan, Citi, Credit Suisse, Bear Stearns, Lehman, and on and on. And every conversation goes just about the same as the sales pitch I’m getting from Vinnie: “We have the best execution … We’re on the floor next to the Big Pharma specialists … We can do this … We can do that …” After a while, it all folds into one squawking disharmony. Not even my outfit can throw anyone off their sales pitch. Big Banking couldn’t care less what you look like as long as you are putting money in their pockets. I’m not sure exactly when it happens, whether it’s while I’m talking with Vinnie or Lehman or Credit Suisse, but the scene cuts to a bird’s-eye-view camera angle. There I am, an
orange robin surrounded by flock of black crows. Suddenly I have an urge to do the entire bag of cocaine, anything to escape. “I have to use the bathroom,” I say. I look around the room and see that all the wings have been clipped. Everything is so corporate and homogenized. If everyone grew their hair, dressed with flair, and spoke their mind, I’d be the first one in line at the barber shop, shopping at Brooks Brothers, and picking up a copy of
Barron’s
to have stuff to talk about on Monday.